Alibaba shows China in bubble
There’s no doubt anymore. China’s stock market is in a bubble. There’s only one way forward for Alibaba’s stock, and that is down.
Shares in Alibaba.com nearly tripled today when they started trading in Hong Kong. The shares closed at HK, 39.50, after the stock was originally priced at $13.50.
Alibaba’s shares now trade at 320 times its expected net profit this year of $83 million. History has shown that no company can sustain that sort of valuation, and that sooner or later, the stock will head for a big fall. It may rise in the short-term, though, if the fever continues.
The average U.S. stock has traded at 16 times earnings from 1900 to 2005. For more on the so-called PE ratio, see here.
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About the Author, Matt Marshall
Matt launched VentureBeat in September of 2006, with the realization that no one else was covering the entrepreneurial and tech innovation scene with the velocity or depth that he was. Prior to founding VentureBeat, he covered venture capital for the San Jose Mercury News from 2001 to 2006. In 2002, Matt was awarded "Journalist of the Year" by the Northern California Society of Professional Journalists. Prior to working at the Merc, he was a correspondent for the Wall Street Journal in Bonn, Germany from 1995 to 1998, and a writer for the Washington Post in 1994. Matt holds a PhD in Government and an MA in German and European Studies from Georgetown University. In addition to VentureBeat, Matt is also the Executive Producer of DEMO, the leading launchpad event for emerging technologies.
